Vadilal Enterprises Limited Vs State of U.P. And 2 Others (Allahabad High Court)
Show cause notice under Section 74 of CGST Act 2027 unsustainable in absence of any allegation of fraud, misstatement, or suppression: Allahabad High Court
The Allahabad High Court, in the case of Vadilal Enterprises Ltd. v. State of U.P. & Ors., has ruled that a show cause notice issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) is unsustainable if it does not explicitly allege fraud, wilful misstatement, or suppression of facts. The court emphasized that these allegations are crucial prerequisites for invoking Section 74.
Vadilal Enterprises Ltd. had received a show cause notice under Section 74 for a significant demand of ₹260,15,37,910. Previously, a notice on the same issues had been issued under Section 73 of the CGST Act, to which the company had responded. During the disposal of the Section 73 notice, authorities noted discrepancies between documents submitted during an audit and those provided in the proceedings, indicating a fresh notice under Section 74 would follow. The petitioner challenged the subsequent Section 74 notice, arguing it lacked the necessary allegations of fraud, wilful misstatement, or suppression. The respondent contended that the available material indicated suppression and that the notice’s substance should be considered over its precise wording.
